This lecture discusses the components and
complexities of an organization’s culture and the external
/internal environment and how these may constrain managers. Managers are
also responsible for improving
stakeholder involvement in decisions making and actions taking. Managers
must be aware that
organizational culture and organizational environments will influence
both the way an organization is
managed as well as its effectiveness. How can an understanding of
organizational culture and the external
environment help the manager? Let us learn.
The impact of the external environment on a
manager’s actions and behaviors cannot be overemphasized.
There are forces in the environment that play a major role in shaping
is defined as outside institutions and forces
outside the organization that potentially
affect an organization’s performance.
Types of Environment:
1) External Environment
2) Internal Environment
‘Major forces outside the organisation with potential to influence
significantly a product or
service’s likely success is called its external environment.’
Types of external environments:
The insights derived from systems theory have
helped to highlight the importance of a managed interaction
between an organization and its external environment. Two major
divisions have been made in the external
1) The Mega Environment
2) The Task Environment
The Mega Environment
or general environment as it is
sometimes called, is that segment of the
that reflects the broad conditions and trends
in the societies within which an organization
Major Elements of the Mega Environment
of the mega-environment reflects the current
knowledge regarding the production of products and services.
a. Technology is a particular state of knowledge. It is not “things.” A
computer, for instance, is an artifact or an example of technology and
not technology itself.
b. Research indicates that technology tends to evolve through periods of
incremental change punctuated by technological breakthroughs that either
enhance or destroy the competence of firms in an industry.
c. Numerous publications (such as Business Week, Forbes, etc.) and
services (such as LEXIS/NEXIS) provide information regarding
technological and other environmental elements.
of the mega-environment encompasses the
producing, distributing, and consuming wealth.
a. In a capitalist
economy, economic activity is governed
by market forces
and the means of production are privately owned by individuals, either
directly or through corporations.
b. In a socialist
economy, the means of production are
owned by the state
and economic activity is coordinated by state plan.
c. In practice, countries tend to have hybrid economies, incorporating
elements of capitalism and socialism.
d. Organizations are influenced in any given economic system by a
economic conditions over which they have little control, such as
and interest rates.
3. The legal-political
element of the mega-environment
includes the legal and
governmental systems within which an organization must function.
Organizations must operate within the general legal
framework of the
countries in which they do business.
Organizations are subject to an increase in lawsuits
filed by customers or
The political issues which affect organizations
include those which
influence the extent of government regulation.
of the mega-environment includes the
values, norms, beliefs, behaviors, and associated demographic trends
characteristic of a given geographic area.
a. The sociocultural element is of particular importance to
b. Sociocultural trends can result in important shifts in demand for
5. The international
element of the mega-environment
includes the developments
in countries outside an organization’s home country that have the
to the organization. International factors far beyond the direct
influence of a
particular organization can have profound effects on its ability to
a. Fluctuations of the dollar against foreign currencies influence the
of an organization to compete in international markets.
b. Free-trade agreement, such as the NAFTA, GATT can affect an
organization either positively or negatively.
The Task Environment
is that segment of the external environment
made up of specific outside elements
(usually organizations) with which an organization interfaces in the
course of conducting its business.
task environment depends on the products and services the organization
offers and the locations where it
conducts business. The organization may be more successful in affecting
its task environment than it is its
Elements of the Task Environment:
1. An organization’s
customers and clients
are those individuals and organizations
that purchase its products and/or services. It is becoming increasingly
to stay in touch with customers’ needs.
2. An organization’s
competitors are other organizations that either offers of
high potential of offering rival products or services.
a. Organization needs to keep abreast of who their competitors are and
they are doing.
b. Ways to track what competitors are
doing include obtaining information
from commercial data bases, specialty trade publications, news clippingsbr>
from local newspaper, help-wanted ads, published market research
reports, business reports, trade shows, public filings, advertisements,
3. An organization’s
those individual organizations that supply the resources (such as raw
materials, products, or services) the organization needs to conduct its
4. An organization’s
consists of those individuals who are potentially employable by the
a. Organization may have to shift their location if labor supplies dry
some areas and increase in others.
government agencies provide services
and monitor compliance with laws and regulations at
local (e.g., consumer affairs), state or regional (e.g., health
department), and national (e.g., CBR) levels.
6.Organization’s Relationships with Stakeholders:
1. Stakeholders are any constituencies in the
organization’s external environment that are affected by,
or have a vested interest in, the organization’s decisions and actions
2. Stakeholder relationship management is important for two reasons:
a. It can lead to improved predictability of environmental changes, more
greater degrees of trust, and greater organizational flexibility to
reduce the impact of change.
b. It is the “right” thing to do, because organizations are dependent on
external stakeholders as
sources of inputs and outlets for outputs and should be considered when
making and implementing
3. Stakeholder relationships are managed using four steps:
a. Identify external stakeholders
b. Determine the specific interests of each stakeholder group
c. Decide how critical these interests are to the organization
d. Determine what specific approach managers should use to manage each
THE ORGANIZATION’S CULTURE:
Just as individuals have a personality, so,
too, do organizations. We refer to an organization’s
personality as its culture.
Organizational culture is a system of shared meaning and beliefs
within an organization that determines,
in large degree, how employees act. This definition implies several
1. Culture is a perception that exists in the organization, not in the
2. Organizational culture is a descriptive term. It describes rather
3. Seven dimensions of an organization’s culture have been proposed:
a. Innovation and risk taking (the degree to which employees are
encouraged to be innovative and
b. Attention to detail (the degree to which employees are expected to
exhibit precision, analysis, and
attention to detail)
c. Outcome orientation (the degree to which managers focus on results or
outcomes rather than on
the techniques and processes used to achieve those outcomes)
d. People orientation (the degree to which management decisions take
into consideration the effect on
people within the organization)
e. Team orientation (the degree to which work activities are organized
around teams rather than
f. Aggressiveness (the degree to which people are aggressive and
competitive rather than easygoing
g. Stability (the degree to which organizational activities emphasize
maintaining the status quo in
contrast to growth)
Employees “learn” an organization’s
culture in different ways.
1. Organizational stories are one way that employees learn the culture.
These stories typically involve a
narrative of significant events or people.
2. Rituals are repetitive sequences of activities that express and
reinforce the key values of the
organization, what goals are most important, which people are important.